Item
2.05. Costs Associated with Exit or Disposal Activities
In
response to the current and anticipated future economic uncertainties, on
December 11, 2008, the Company implemented an expense reduction program that
included (a) a reduction in workforce, (b) a reduction in certain office leases,
(c) the elimination of its two print publications, and (d) a continuation of
strict controls on discretionary spending. During the
twenty-four month period immediately preceding the announced workforce
reduction, the Company hired approximately 150 employees to support existing and
anticipated growth. The reduction in workforce will result in a decrease of the
Company’s employees by approximately 76 full-time positions, representing
approximately 12% of its total workforce. The Company expects that it will
complete this reduction in workforce no later than December 31,
2008.
As
a result of the expense reduction program, the Company expects to incur a
pre-tax charge of between $1,800,000-$2,000,000 in the fourth quarter of 2008.
This charge will include expenses related to the severance for terminated
employees and other exit-related costs arising from contractual and other
obligations. Substantially all of these charges will result in cash
expenditures. The employee termination payments are expected to
be substantially completed by the end of the first quarter of 2009 and the
payments associated with terminated office leases will be completed by the
fourth quarter of 2009. This charge was not included in the Company’s fourth
quarter financial guidance provided on November 6, 2008.
Item
7.01 Regulation FD Disclosure
The
Company has implemented the cost reductions described in Item 2.05 of this Form
8-K to lower its current and future operating expenses in order to align its
costs with the current business conditions with the goal of maintaining its
profitability and investing as appropriate to gain market share. These cost
reductions were determined in conjunction with the Company’s annual budget
process.
The
Company expects to achieve a 2009 adjusted EBITDA margin between 15% - 20% and
expects a net loss per basic share between $(0.10) and $(0.02). The
Company will provide additional 2009 financial guidance when it reports its
fourth quarter 2008 and fiscal year 2008 financial results in February 2009. The
term "adjusted EBITDA" refers to a non-GAAP financial measure that the Company
defines as earnings before net interest, income taxes, depreciation, and
amortization, as further adjusted for stock-based compensation. The Company
defines “adjusted EBITDA Margin” as adjusted EBITDA as a percentage of total
revenues.
The
Company does not expect the cost reductions to prevent the Company from
continuing to invest in business initiatives aimed at gaining market share, most
notably the launching of new websites and the expansion of its international
operations. Additionally, the Company does not expect the cost reductions to
have an adverse affect on its current financial position. As of
November 30, 2008, the Company has approximately $68,800,000 in cash, short-term
and long-term investments. The Company does not hold any investments in auction
rate securities or similarly illiquid investments. As of November 30, 2008, the
Company had bank debt of $3,250,000.
Forward Looking
Statements
Certain
matters included in this Form 8-K may be considered to be "forward-looking
statements" within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act
of 1995. Those statements include statements regarding the intent, belief or
current expectations of the company and members of our management team. All
statements contained in this Form 8-K, other than statements of historical fact,
are forward-looking statements, including those regarding: guidance on our
future financial results and other projections or measures of our future
performance; our expectations concerning market opportunities and our ability to
capitalize on them; and the amount and timing of the benefits expected from
acquisitions, from new products or services and from other potential sources of
additional revenue. Investors and prospective investors are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those contemplated by such forward-looking statements. These statements
speak only as of the date of this Form 8-K and are based on our current plans
and expectations, and they involve risks and uncertainties that could cause
actual future events or results to be different than those described in or
implied by such forward-looking statements. These risks and uncertainties
include, but are not limited to, those relating to: market acceptance of our
products and services; relationships with customers, strategic partners and our
employees; difficulties in integrating acquired businesses; and changes in
economic or regulatory conditions or other trends affecting the Internet,
Internet advertising and information technology industries. These and other
important risk factors are discussed or referenced in our Annual Report on Form
10-K filed with the Securities and Exchange Commission, under the heading "Risk
Factors" and elsewhere, and any subsequent periodic or current reports filed by
us with the SEC. Except as required by applicable law or regulation, we do not
undertake any obligation to update our forward-looking statements to reflect
future events or circumstances.